How to reach your goals with a $50,000 fixed-rate HELOC

Owning a home has its perks, and growing equity is at the top of the list. If you're not familiar with that word, it means the difference between what you owe on your home and what it's worth. 

Here's another way to think of it. Equity is the reward you get for diligently paying the mortgage year after year. You could turn it to your advantage by getting a home equity loan to fund your big (or small) financial goals. 

What is a $50,000 fixed-rate HELOC?

A home equity line of credit or HELOC is a flexible line of credit you can draw from as needed. When you get a HELOC, you're borrowing against your home equity. 

HELOCs have a draw period and a repayment period. During the draw period, which typically lasts from 5 to 10 years, you can access your line of credit. When the draw period ends, you’ll enter repayment. At this point, you can’t borrow more. 

You'll pay back the part of your credit line that you use, with interest. Your payment will be calculated to fully repay your loan by the end of your repayment period. 

HELOCs can have variable or fixed interest rates. A fixed-rate HELOC has a set rate that never changes for the life of the loan. That makes it easier to calculate how much interest you'll pay and budget for monthly payments. 

It's harder to do the math with a variable-rate HELOC. Variable rates are tied to benchmark rates, which could change over time. That means your HELOC rate—and your payments—could change as well. 

Common reasons to get a $50,000 fixed-rate HELOC

What could you do with an extra $50,000? Quite a lot, actually, including:

• Funding home renovations, improvements, or repairs

• Consolidating debt 

• Paying for your child's education expenses

• Starting or expanding a business

• Covering a major life event, like a wedding

• Paying for medical expenses or vet bills

You could also keep a $50,000 HELOC on standby in case of emergencies.

Say you unexpectedly lose your job, resulting in a temporary financial hardship. While you look for a new job, you could draw on your line of credit to cover mortgage payments, keep the lights on, buy groceries, and pay basic living expenses. 

How to qualify for a $50,000 fixed-rate HELOC

Lenders look at a few things to determine if you're eligible for a $50,000 HELOC. Generally, home equity loan requirements include:

• A good credit score

• Sufficient equity in your home

• Steady employment and income

• An acceptable debt-to-income (DTI) ratio, which is the percentage of your income that goes to debt each month

Lenders could require a minimum credit score which may range from around 620 to 700 for a $50,000 fixed-rate HELOC. Each lender decides what the cutoff is. You may need a higher score to get a lower interest rate or a bigger loan. Before your HELOC is approved, the lender will verify your income and review your current financial situation. They want to make sure you can comfortably manage your HELOC payments on top of your existing mortgage and other bills. 

Lenders use something called the combined loan-to-value (CLTV) ratio to decide how much they're willing to lend. 

Your CLTV is all outstanding loans, including mortgage debt, you have compared to how much the home is worth. The mortgage debt includes your first mortgage, if you’re still paying it off, and the new HELOC you want. 

A typical CLTV limit is 80% or less. 

For example, say your home is worth $350,000. You owe $230,000 on your mortgage. Your LTV is about 66%, which would put you in the range to be eligible for a HELOC. If the lender’s CLTV limit is 80%, you could apply for a $50,000 HELOC.

Steps to apply for a $50,000 fixed-rate HELOC

If you're interested in getting a fixed-rate HELOC for $50,000, you'll need to find the right lender to work with. Getting an online rate quote could give you an idea of what HELOC terms you might qualify for. 

As you compare HELOC options, consider:

• How much you could borrow vs. what you need to borrow to meet your goals

• HELOC rates and what you're likely to qualify for based on your credit history 

• Terms, including the draw period and repayment period

• HELOC fees you might have to pay

• Funding and how quickly you'll be able to access your line of credit once approved

Once you find a lender to work with, you’ll need to give them some information about yourself and your home. They’ll need to know your current mortgage balance and payment. You may be asked for bank statements, pay stubs, and other supporting documentation. 

The lender will schedule an appraisal to determine what your home is worth. This could take place virtually or in person. 

If all goes well and you're approved for a HELOC, the final step is signing the paperwork. You may have the option to pay your closing costs out of pocket or have them deducted from your loan.

Typical home equity loan closing costs are 2% to 5% of the amount you borrow and could include:

• Origination fees

• Underwriting fees

• Appraisal fees

• Attorney fees

• Notary fees

• Recording fees

• Title search fees

• Credit report fees

How long does it take to get a HELOC? It's possible to get a equity line of credit approved and funded in as little as 15 days. The exact timing varies. 

What to expect after you get approved for a $50,000 HELOC

Once your HELOC Is approved and all the paperwork is complete, your lender will make your credit line available to you. You may be able to access it via:

• Paper checks

• Debit card

• In-person withdrawals (if you're going through a traditional bank)

• Electronic transfers to a bank account

During the draw period, you could withdraw funds as needed up to the limit. If your lender requires a minimum initial draw, they should tell you that upfront. But otherwise, you don't have to borrow the maximum loan amount unless you need to. 

You may have the option to make interest-only payments during the draw period. These payments go just toward the interest. Interest-only payments don’t let you make any headway against the amount you owe.

With an Achieve Loans HELOC, you’ll make a regular principal and interest payment during the draw period and the repayment period.  

If your lender allows it, you could pay off a HELOC early. Doing so might mean making higher payments in the short term, but it could save money on interest in the long run. 

Before paying off a HELOC early, check with your lender to see if a prepayment penalty applies. A prepayment penalty is a fee lenders can charge when a loan is paid off early to recover some of the interest they don't get to collect. 

What's next

• Look at your list of highest-priority financial goals. Calculate how much money you'll need to reach them. 

• Use an online home value estimator tool to get an idea of what your home is worth. 

• Get a free HELOC quote to learn how much you could borrow and what you'll pay in interest.